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New ASIC Chair is right – parts of finance sector have 'forgotten' whose money they are investing

  Published: 19 Oct 2017

Comments reported today from the incoming Australian Securities and Investment Commission Chairman, James Shipton, saying the problem with the finance sector is that it has 'forgotten' who owns the money, should prompt the Government to abandon its super fund governance changes.

Industry Super Australia public affairs director Matt Linden said: “Public trust in the finance sector is at an all time low – and this extends to superannuation where bank-owned funds appear to be using compulsory retirement savings to drive parent company profits at the expense of member returns.”

“It is extraordinary the Government's solution to the disconnect between boards and investors identified by Mr Shipton is to abolish the representative trustee model from the superannuation law and mandate quotas of ‘independent’ directors - typically drawn from the ranks of the finance industry.

“The reasons for the superior culture and returns of not-for-profit funds lies in the representative trustee model”.

“In the not-for-profit governance model, the trustees have a direct link to those who contribute much of super money – employers - and those who own it – employees”.

“This direct link to workers and employers is absent in retail funds and much of the financial services industry”.

“Rather than abolish the representative trustee model from the law, the government should withdraw its  flawed governance bill. If anything it should introduce laws that require all superannuation funds to appoint representative trustees who know exactly whose money the institution is stewarding,” said Linden.

In November 2016, Financial Services Minister Kelly O’Dwyer vowed to take super funds to “the same standard as other financial services organisations like banks and life insurance companies”*.

Not-for-profit funds which have avoided scandal, on average outperformed bank-owned retail funds for two decades, and invested in Australian nation-building infrastructure projects, are calling on the parliament to reject the Trustee Governance Bill, re-introduced in September.

The three reform bills are: Superannuation Laws Amendment (Strengthening Trustee Arrangements) Bill 2017, Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2017; Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No.2) – ISA’s four separate submissions on the Bills cover: trustee governance; unpaid super; choice of fund; member outcomes.

*Quote from “Super industry laughs at O’Dwyer”, Australian Financial Review, 23 Nov 2016

Matt Linden is available for interview. Media contact: Phil Davey 0414 867 188.

Industry Super Australia provides policy, research and advocacy on behalf of 16 not-for-profit Industry SuperFunds who are the custodians of the retirement savings of five million Australians.

Industry Super Australia Pty Ltd ABN 72 158 563 270, Corporate Authorised Representative No. 426006 of Industry Fund Services Ltd ABN 54 007 016 195 AFSL 232514

*The above material, whilst correct at the time of publication may include references or statements which are no longer current.

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